China's acquisition of the strategic Hambantota
port from Sri Lanka has given it "control of a territory" just a few
hundred miles off the shores of India, highlighting its "debt trap"
and ambitious use of loans to gain influence around the world, the New York
Times has said.
A detailed article in NYT about Sri Lanka's
handover of the Hambantota Port to China illustrates how China turned an ally's
struggles to its strategic advantage. The report said that feasibility studies
had found that the Hambantota port would not work and "frequent
lenders" like India had refused to provide loans or assistance for the
port, developed during Sri Lanka's president Mahinda Rajapaksa's rule.
"However, every time Rajapaksa turned to his
Chinese allies for loans and assistance with the ambitious port project, the
answer was yes," it said.
The investigative report said that over years of
construction and renegotiation with China Harbor Engineering Company, one of
Beijing's largest state-owned enterprises, the Hambantota Port Development
Project distinguished itself mostly by failing, as predicted.
At a time when tens of thousands of ships were
passing by along one of the world's busiest shipping lanes, the port drew only
34 ships in 2012, it said.
With Rajapaksa being voted out of office in 2015,
Sri Lanka's new government struggled to make payments on the debt he had taken
on for the port development.
"Under heavy pressure and after months of
negotiations with the Chinese, the government handed over the port and 15,000
acres of land around it for 99 years in December last year. The transfer gave
China control of territory just a few hundred miles off the shores of a rival,
India, and a strategic foothold along a critical commercial and military
waterway, the report said.
The case is one of the most vivid examples of
China's ambitious use of loans and aid to gain influence around the world and
of its willingness to play hardball to collect, the report said.
The report noted that Indian officials feared
that Sri Lanka is struggling so much that the Chinese government may be able to
dangle debt relief in exchange for its military's use of assets like the
The final lease agreement however forbids
military activity there without Sri Lanka's invitation. "The only way to
justify the investment in Hambantota is from a national security standpoint
that they will bring the People's Liberation Army in, India's former foreign
secretary and national security adviser Shivshankar Menon was quoted as saying
in the report.
They approached us for the port at the beginning,
and Indian companies said no, said Menon, who served as India's foreign
secretary and then its national security adviser as the Hambantota port was
being built. It was an economic dud then, and it's an economic dud now.
The investigation is based on months of
interviews with Sri Lankan, Indian, Chinese and Western officials and analysis
of documents and agreements related to the port project.
The report said the investigation presented a
stark illustration of how China and the companies under its control ensured
their interests in a small country hungry for financing.
The debt deal which led Sri Lanka to hand over a
strategic port to China also put focus on some of the harshest accusations
about President Xi Jinping's signature Belt and Road Initiative: that the
global investment and lending program amounts to a debt trap for vulnerable
countries around the world, fueling corruption and autocratic behavior in
The Times investigation found during the 2015 Sri
Lankan elections, large payments from the Chinese port construction fund flowed
directly to campaign aides and activities for Rajapaksa, who had agreed to
Chinese terms at every turn and was seen as an important ally in China's
efforts to tilt influence away from India in South Asia.
Further, while Chinese officials and analysts
have insisted that China's interest in the Hambantota port is purely
commercial, Sri Lankan officials said that from the start, the intelligence and
strategic possibilities of the port's location were part of the negotiations.
The report said that as Sri Lankan officials
became "desperate" to get the debt off their books in recent years,
the Chinese demands centered on handing over equity in the port rather than allowing
any easing of terms.